Gamers need hugs

Most geeks have a sense of humor about being geeks. They wear the term with pride, knowing that these days it connotes expertise and passion as much as it does obsessiveness and poor seduction skills. Geeks are the biggest creators and consumers of geek humor, and as a tech journalist with a geek-heavy audience, I rarely think twice about tweaking the nerds a little. They usually giggle and tease me back. It’s a cute thing we do, and everyone seems to have a good time.

Then there are the gamers.

Gamers (and, it seems, game makers) are sooooo sensitive. Embroiled as they are in their decades-long plight to be taken seriously, many are remarkably touchy when prodded. On Tuesday, I prodded.

I questioned the hefty tax breaks and subsidies foreign video game companies enjoy on our shores. Within hours I was called a this, one of these and invited to consume some of this. Scatological tweets were soon buttressed by hysterical posts—VillageGamer.net deeked the issue of tax breaks, instead focusing on the fashion-model appearance of coders (?) and providing yet another defense of video games as Great Works of Art (a constant, tiresome crusade).

While all agreed that I am an asshat, few tried to explain what was wrong with my argument. My characterization of video game programmers as unshaven code-monkey grunts enraged the community to a degree that obscured the issue at hand. Oh well. Only Torontoist and my Macleans.ca colleague Peter Nowak delved into the details. Both provided a well-argued defense of the economic benefits of the tax breaks and subsidies in question, and they deserve a read. But I remain unswayed, and I’ll tell you why.

Canada’s game industry, it is true, involves more than coders. It employs voice actors, graphic designers, painters, musicians and more. The coder grunts, though treated shabbily within the business, are themselves highly trained technologists. All of the above talent can be found in Canada, functioning at the highest levels of their respective disciplines. Many of them were trained in Canadian schools. In short, we have all the ingredients needed to build a world-class homegrown video game industry creating our own big-budget console games.

So why sell ourselves short as cheap labour to foreign companies?

As Peter himself points out, we’ve pitted province against province and Canada against second-world nations in a rapid race to the bottom. Yes we have great cities, yes we have great talent, but let’s not kid ourselves—the carrot we’re dangling before the eyes of Ubisoft and Electronic Arts is heavily-subsidized labour. Bucharest is also a great town with wonderful people. Ubisoft is happy to set up shop there, like it is in whichever city will provide them the best deal.

Why are we in a price war with every developing urban center in the world? To what end? To create the “acorn effect,” or so I am told. Among my critics are the folks at Capy Games/Superbrothers of Toronto, who developed the groundbreaking Sword and Sworcery game for the iPad. If you’re going to make an argument for video games as art, theirs is a good game to put forward. From their Twitter accounts, they argue that the presence of Electronic Arts and Ubisoft in Canada has seeded our own Canadian indie gaming scene. Creators leave the big companies and set up shop on their own. If Sword and Sworcery is any indication, the results can be wonderful, and as Capy chief Nathan Vella points out to me, Toronto has a great little indie game maker scene.

But what if we want a big game maker scene? As Capybara Games grows, it will increasingly be competing against foreign companies like Ubisoft for Toronto’s best talent—but it’s not a fair fight. Not just because Ubisoft is such a giant, but because Capy’s own provincial government is stacking the deck against them, financing a foreign competitor with millions to use against a homegrown upstart (Capy gets some tax breaks from Ontario too, which may explain their reaction to my argument—but nothing in the realm of what Ubisoft enjoys). It’s nice to have little shops with little staffs making little games, but what’s stopping us from hosting the next major player, a homegrown giant that will actually pay their taxes?

Canada’s video game industry would do well to learn from the example of our film industry. We have some of the best talent and the most skilled craftspeople in the movie business. But our best talent gets siphoned off into the U.S. while our crews are auctioned off as a cut-rate alternative to Americans. Meanwhile our domestic productions are so bound up in chasing government funding that they have become incapable of providing a marketable product to audiences.

We can aim higher, and we can do better.

And, folks, corporate welfare is corporate welfare, even when the handouts go to geeks.

In a way, you’ve just explained why our lumber industry tanked; all the cheap wood, all the labour and industry subsidies and grant contributed only to improving shares and postponed a much needed shake up of the industry until its uselessness moved the industry past the point of no return. Now the wood is impossible to fetch so much it’s overcut, the mills are dinosaurs, the labour is ridiculously overpaid, and we have no alternatives products or uses.

All that money should have been spent encouraging innovation, improving efficiency, managing our forests, and upgrading mills.

In a way, you’re saying the same thing about the Canadian gaming industry. Subsidize the innovation, not the labour.

Firstly, Ubisoft, as a foreign-owned company, gets less tax breaks than Capy Games. The tax credits are based on labour expenditures, and an Ontario company has a higher tax credit rate.

Secondly, you can hardly point to one AAA game company that has set up shop outside of Western Europe and North America that is creating hit games. They are cultural goods. There is a reason Hollywood doesn’t just move to Mumbai where it is a lot less expensive. Creating great content requires cultural relevance and close-knit teams.

Thirdly, don’t kid yourself. All governments all over the world find ways of subsidizing the industries they value. Do you think the automotive industry is different? Pharmaceuticals? Aerospace? And you have made a career working in very heavily subsidized industries like broadcasting and magazine publishing.

Tax incentives are economic measures that can build critical mass where it didn’t exist before. The Canadian games industry is now 50% the size of the US games industry. On a per capita basis, we are FIVE TIMES LARGER! Our industry has grown substantially in the past 10 years. Before that, we were only on the map at all because of one large studio: Electronic Arts in Burnaby.

That growth didn’t happen just because we Canucks have some inherent talent for mixing code and cool design. It happened because a number of provinces decided that the games industry is an ideal economic engine. It mixes artists and engineers, it fosters both innovation and creativity. The “mainstream” of games is but a small percentage of what this industry is fast becoming. Games, and game-like experiences, are adding value to education, healthcare, social good, and even heavy manufacturing. In an information society, games are ideal vehicles to promote experiential learning in readily social contexts.

Hollywood is successful because…well, because it is and has alway been successful. It established itself early on as the world centre for the creation of mass entertainment. The talent that drives Hollywood arrives from all over the world. Canada’s top screen talent goes there too, not because funding here makes them mediocre, but because that is where the best opportunities exist for them to create and finance film & tv product.

Suddenly though, we have created a business and creative environment that is the envy of the world. A place with small indies like Capy and big globals like Ubi. Then we have social, online, serious and many other shapes and sizes of games company in between. And it has created a culture and a community around both the art and business of making games. We make the most creative and the most commercial games in the world.

When I travel to the USA and Europe, it heartens me to constantly hear students and aspiring game professionals say that they see their future in interactive entertainment in one of two places: California, or Canada.

Maybe once we reach the pinnacle — when we ARE the “Hollywood” of the games industry — we will be able to ditch the tax credits. We are not quite there yet, but we are gathering great momentum.

Or maybe we can keep using these highly effective economic tools to keep growing the aspects of our economy that we see as important drivers of future growth and prosperity…and creativity.

So, while Mr. Brown may be off on some of the finer points of who get’s what level of subsidy and display a degree of naivete on how business gets done, you do indeed concede the main point of Mr. Brown’s article (If Macleans editors would be so kind, I am about to produce some cultural goods), which might be summarized as follows:

Mr. Brown: “Did you know that the video game industry is getting massive government handouts?”

All most everybody responds, “We are subsidizing the video game industry? WTF!”

He doesn’t appear to concede a thing. Brown’s point is that such subsidies are supposedly unnecessary and harmful. Ian’s rather successfully showed their necessity AND the good they do.

In any case, I suspect “most everybody” would probably change their tune quickly when they were told about the billion and a half dollars in economic activity that the industry generates. Which you were, since I’ve seen your comments, so I haven’t the foggiest idea what you’re so against this.

I find video games to be a total waste of time. I find it ridiculous that they are on the public teat when, in my opinion, despite the apparent success on the balance sheet they are a net loss to society. What utility do they bring? Have they made my life easier? Have they increased productivity in our economy? Have they improved the lives and character of their frequent users? None. No. No. No. Definitely no. They are symptomatic of a society that is giving up on itself. If they disappeared tomorrow, which wouldn’t be soon enough, there would be a jump in GDP because people couldn’t so easily waste their time and actually figure out that they can do something meaningful.

As I have said, I am not, generally against subsidies or publicly owned enterprises, or public investment in new industry (provided the government obtains an equity position). I am against this particular set of subsidies.

And for the record, hewing wood and drawing water is fan fricking tastic! I do love it that much.

And yes he does concede the point of Mr. Brown’s article, which is: Hey, Canada, did you know that the video game industry gets massive government tax breaks, incentives, and subsidies? in paragraph one and two, and proceeds to (attempt to) justify the government hand-outs through the rest of the post. Really, how could you misconstrue that?

It should also be noted that Hollywood was built without government handouts. Those came much much later, when some smooth talker convinced the hand on the public purse that they’d pack up & move if the deal wasn’t sweetened.

ColdStanding on September 16, 2011 at 9:31 pm

To be more precise, Hollywood was built without “official” government handouts. They got plenty of support — just most of it wasn’t above board.

Thwim on September 17, 2011 at 10:44 pm

Thanks for this, Ian.

Not to quibble, but did I get #1 wrong? I don’t say Ubi gets more tax breaks than Capy- I say they get more money from our government in absolute terms. A lot more. True, no? Also, I genuinely would love to hear a different answer to this question than the one I provided: why don’t we have our own Ubisoft? I take your point about Hollywood, but Ubi isn’t from the U.S. Why can France build a company like that but not us? I think it has to do with us reflexively accepting second-tier status, as we do in so many other fields. What do you think?

I took your point to mean that Ubi somehow has government supported cost advantage in hiring over an indie. On a per employee basis, Capy gets more tax breaks on each hire. So the competition for talent, as far as government incentives go, it in the indie’s favour. Yes, Ubi has more capital over all, and can out-price a smaller player if it so chooses. But in my experience, game developers work for large studios for different reasons than small indies. As long as there is a ready supply of talent, it will find its place.

France may have “built” Ubisoft, but there are far more Ubi employees in Canada than in “la République francaise”. Aside from Montreal (2500 employees), they have studios in Quebec City (300), Vancouver (100?) and Toronto (120+) plus an animation studio in Montreal (100). Yes, head office is still in Paris and there is a studio in Montpelier, but France, Germany and the UK have been bleeding video game jobs and senior talent to Canada and the US for several years now. When you consider they have 6400 employees worldwide over at least 25 cities, you can see they are more a Canadian company in many ways than they are anything else. The jobs in Canada are not low-skill commodity jobs, they are making their biggest worldwide commercial franchises with their top global talent right here. Their CEO in Canada is Yannis Mallat, a Canadian. The studio head in Toronto, Jade Raymond, is Canadian. My part answer to your question is that Ubisoft is more of a Canadian company in many ways than it is anything else.

The other part to your question is history and money. History because there was not a strong clustered games industry in Canada in the formative more days of the games industry until EA bought Distinctive Software in Burnaby. Money because there has traditionally been very little high risk capital available to seed and scale software and entertainment ventures up here in the great white north. Now, there is a limited world market for AAA console games and we may even see fewer of those mega-players, rather than more in the future.

But let’s not forget homegrown successes like Bioware (sold to EA for $775M) in Edmonton, and Club Penguin (sold to Disney for $700M) in Vancouver. Yeah, they sold to where the money is, but they still develop substantially here in Canada. There are smaller but still very good sized independent studios like Behaviour in Montreal (400 employees), Frima Studio (250+ employees) in Quebec City, Digital Extremes (150+ employees) in London and Silicon Knights (185+ employees) in St Catharines. There are many more.

I have worked on behalf of game studios in Canada for many years, and I have never met one that ever accepted second tier status. In fact, it is now a badge of honour to be from Canada. But not every studio necessarily deems success to be world domination. That can come with a price, especially if you have creative ambitions. Studios like Capy can perhaps make the kind of great games they do because they are small enough to maintain vision and control. And with digital distribution and many platform alternatives, you no longer need millions in capital and large infrastructures to make decent money.

But you do need money, talent and a strong ecosystem to support a thriving industry. Thats where the Canadian and provincial governments have stepped in and created programmes like tax credits and media funds that fill in gaps where the private sector fails to provide growth capital. And when you step back, you begin to see a rising global superpower rising from the sleet and snow. It is funny that it is much more apparent to those outside of Canada than it is to most who live here. I sometimes think we are trained to look at our media industries as second tier given our history as bit players in North America. We are used to being a (human) resource sector to the Hollywood and New York machines. But in video games, we are not that at all. We are the world’s most successful video games industry…and growing.

And what cut did the public purse get from these pay outs? Did we get an equity position in exchange for providing a (cringe) “strong ecosystem to support a thriving industry.”? Venture capital usually gets 50%. What’d we get? 0%.

Ridiculous. We have been had. These programs need to be subject to a public inquiry. Where is the auditor general on this one?

Jesse Brown’s stance simplified: The government is using public tax money to subsidise low-level programming and design work down to third world levels of pay in order to keep studios here while the foreign corporations who hold the licensing fees keep their head office elsewhere.

Your stance: The government has to subsidise the low-level programming and design work down to third world levels if pay in order to keep studios here. Keeping the studios here attract foreign corporations because it is cheaper for them to operate.

You two are not exactly on opposite sides of the coin. To differentiate your stances, you have to apply it the acid test “What if the subsidy was removed?”

Where Jesse takes it one step further is by proposing to move the subsidy from low-level jobs to innovators and upstarts. Instead of being another country’s sweat shop, we would host the next big thing. France and England are not worried about losing jobs to us because they get the license money from our hard work, and that’s a lot more lucrative.

What you said, specifically, was: ”(Capy gets some tax breaks from Ontario too, which may explain their reaction to my argument—but nothing in the realm of what Ubisoft enjoys).”

That doesn’t say it’s more money in absolute terms, that says that the tax breaks Capy receives are nothing in the realm of what Ubisoft enjoys, ie, that Ubisoft gets more tax breaks.

Had you been concerned with writing a balanced piece instead of trying to defend your argument, you wouldn’t have been so concerned with the rhetoric and thus wouldn’t have lied.

And as pointed out, we have built top-tier companies. Things like Bioware in Edmonton, are a fine example. That they ended up selling to the US just goes further to demolish your point.. they started here, got a better deal there. So the tax-subsidies are an attempt to quell that.

The way I see it, Bioware is a perfect example to support his point. What EA bought exactly was Bioware’s licensing rights. Any kind of merchandise that bears license materials from Bioware’s products goes directly to EA. Meanwhile, Bioware retains their studios here in Canada. The only reason for that is a good chunk of the studios’ grunt work is subsidised by government money so the economic benefit we see in Canada is Bengladesh levels of salaries.

The result is that EA calls the shot from their US headquarters and reap the reward from the Canadian studios creative work through licensing rights. Any incentive for groundbreaking creativity is now gone from that studio so expect Bioware to keep making sequels until the market lose interest, at which point they’ll fade or go bust.

You ask why we must compete with incentives, and then point out that these firms will set up “wherever they can get a good deal”. Sounds like a need for incentives to me.

You complain that small Canadian companies will have a hard time competing, and ignore the benefits of having a developed hub/cluster of firms to form linkages with and large talent pools to exploit. Somehow you think this justifies a seguay complaint about Canadian film talent that gets “siphoned off into the U.S.” oblivious the fact that this is because most of the major film clusters are in the U.S. so that’s the place to be!

Are we supposed to be all romanticized about “the little guy” and not want to actually be bigger than that? Good grief.

Throw in a few trite comments about the supposed insecurity of “gamers” and their need for “hugs” and hit send?

From my perspective we could be having this conversation about any number of high tech firm types, and your arguments would remain just as facile.

I don’t know guy, sounds like you’ve jawed yourself into a corner and can’t find a way out.

“Wherever they can get a good deal” is not shopping for subsidies, it is shopping for the lowest price. If you have ever had to negotiate a commercial lease, you’d know that there are a number of ways to make the deal happen. (For example: you can bend over the left side of the barrel or the right side. You can get a kiss before or after, but never before and after, etc. )

The facile construction of your rejoinder is: high tech firms produce goods. Goods are goods, how can we favour one over the other? The truth is that not all high tech firms produce the same quality of cultural goods (at term that is right up there with natural hubs and bespoke, for me). His point, which aught be obvious, were you not so determined to protect your favoured cultural goods, is: in a time of limited income for governments, is our money really going to best use to subsidize the video game industry as opposed to health care or other technology firms that are developing tools and products that make us more efficient as an economy.

Duh.

Oh, and: Did you, general reader, know that the video game industry is getting massive subsidies, and are you OK with that?

Keeping it real simple for you:
A) you have conceded that there are massive subsidies for the video games making industry in Canada
B) faced with the undeniable, your justificatory counter-claims and warrants boil down to “So what? Everbody is doing it.” or “You don’t know what you are talking about, therefore, you are not worthy of notice.” Worse yet, your over-reliance on buzz words and catch phrases in a vain attempt to show your street cred.

Unfortunately for your position, the cat is out of the bag. The examination of the merits of subsidizing this “industry” (if a new-fangled theatrical production company can really be in the same class as actual industry) of questionable value to the common good is still very much on the table. Subsidies to other industries are regular fare for journalists to question. Get used to it.

I am in the dark about a great many things. This is no badge of dishonor, save one fails to acknowledge it. One of the means by which I attempt to alleviate my ignorance is to read the NEWS. Macleans is a NEWS magazine. In this instance, it has supplied a want in my understanding. I don’t know why you’d ad hominem on this topoi, save to surmise you have an unsubstantiated approbation of your degree of ignorance in relation to others.

I do not have a general problem with subsidies. I have a particular problem with video game production receiving subsidies over more worthy enterprises. (Oh great horror! A value judgement! Shibboleth! He is not one of us!)

You respond to me because you are convinced of your power of persuasion. I respond to you because I am unconvinced of the validity of your position. If you find argumentation so distasteful, why not do us all a favour & preface your comments with a notice to the effect that you will brook no questioning.

I find debate invigorating for the most part. I’m happy to agree to disagree on a great many things, (after a few exhilarating rounds of course) since most things have a subjective component. In fact, some of my most favorite people here are those I’ve disagreed with vociferously from time to time.

However, I do have some difficulty accepting strongly negative contradictory opinions based on nothing BUT a subjective perspective.

So you don’t think tax incentives should employed for “video games”, but can’t supply any sound logic for that determination beyond personal preference.

Okay then, what’s to debate?

Perhaps I should consider that you don’t realize you are mischaracterizing my opinions?

Ah, but your use of derogatory insinuation would suggest you know only too well the weakness of your position, as a man with sound arguments will not choose to dilute his opinion in this manner.

Your grasp of language is above par, and you are good at framing an argument. Perhaps on another topic you will have more engaging points to offer.

Cheers ColdStanding.

Phil King on September 16, 2011 at 2:55 pm

What? Leaving so soon? I was just getting down to work, for there is a great deal to debate. No matter. I will take your whiff of civility as a sufficient beg-off.

My resistance to your position is that you have insufficiently acknowledged the fact of subsidization, ignored discussion of definition, placed your defense in quality. The end result being that movement to policy is impossible because the process has been subverted.

I’d be well pleased to hear a presentation of warrants in favour of subsidies to the video game industry, but only after the receiving parties fess up to not being full fledged entrepreneurs because they are on the public teat.

ColdStanding on September 16, 2011 at 4:01 pm

Well, the acorn effect does work — sometimes. It usually needs some other force acting as a halo. Compare and contrast two erstwhile Silicon Valleys of The North: Ottawa and Waterloo. Ottawa was a bit of a darling for politicians and policy makers throughout the 90s, and a lot of money was spent to dangle various carrots in front of various foreign corps in the hopes this would jump-start our glorious digital future.

That oak never really took root, and it still feels grafted on. Waterloo, on the other hand, has benefited from generations of local tech, business and math students and an early interest in forming local start-ups. But this sort of thing takes a long time. Arguably, the current Waterloo tech scene really started in the mid 80s, which is forever in tech terms. The venture capitalists came much, much later.

But the region has acted like a crucible for real domestic business.

So, there is value in criticizing the blind application of tax breaks to encourage foreign tech businesses coming to Canada to take advantage of the cheap tech workers and hire up all the Seneca grads the same way they hire Korean artists as “in-betweeners.”

Maybe some of the folks will start their own interesting digital media ventures. But they need more than that subsidized first job.

Depends. One of the big trends in game design right now is game designers going “indie”. Talent will work at one of the big studios, develop skills and expertise, and then strike out on their own. This is for a lot of reasons, but one of the biggest is that there’s been an absolute explosion of indie developers and talent right now, thanks to the ease of digital distribution and the proliferation of useful tools for coders, designers and artists alike.

When these guys strike out on their own, they’re going to be relying on the support and professional networks that they’ve developed. Those networks tend to be local. Is it really so hard to believe that these designers might stay in Toronto, Vancouver, Montreal or Calgary if they’ve spent so much time building their personal and professional lives in these places? With the development of these skilled networks, is it really so hard to believe that Canadian cities could become global centers for interactive entertainment design?

Do we want that? Or do we want to go back to being known for nothing more than efficiently digging things out of the ground?

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